Friday, February 26, 2021 Headlines

GameStop is on the rise once again.
First public offering in cryptocurrency exchanges on the horizon.
Surprise bond purchase from RBA.

US-based game store chain GameStop shares are on the agenda of the markets again. GameStop shares rose by more than 100% after the climb in January, again witnessing strong movements.

GameStop Corp. soared Thursday as retail investors revived the surge in Reddit-favorite stocks, pushing it to reap $5.9 billion in market value over two days. The video-game retailer rose as much as 85% to $170.01 in New York, its highest since Feb. 1, as trading volume soared. The day before, the gaming retailer’s stock closed nearly 104% higher.

The surge comes about a month after a wild GameStop (GME) trading frenzy caused its stock to jump around 1,600% in a matter of days, though it quickly fell from its highs around $350.

GameStop’s surge this week was initially spurred by a final-hour rally Wednesday that brought the stock its biggest advance since Jan. 29, the day Robinhood Markets restricted trading in it and 49 other stocks at the height of the frenzy.

Various explanations circulated as to what spurred the rallies. While market experts could not pinpoint the exact reason for the new rise, some investors attributed the rise to the resignation of Jim Bell, Finance Director, a key figure in GameStop’s management.

Bell’s resignation was the first major manager change at GameStop in two years, while the company said that a new manager with the skills and qualities to help accelerate GameStop’s transformation was searched. A source speaking to Forbes last night indicated that Bell’s resignation wasn’t exactly his idea and that the board had lost faith in Bell to make the necessary e-commerce shifts to save the company.

This latest frenzy is causing concern among some of the most senior figures in the U.S. investment industry. “It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,” said Charlie Munger of the Berkshire Hathaway fund, a long-time business partner of world-famous investor Warren Buffett.

In addition, Futures on US stock indices showed mostly positive dynamics on Thursday in anticipation of a new portion of internal statistics, which will indicate the state of this economy, according to trading data.

The futures on the Dow Jones Industrial Average (DJIA) grew by 0.2% – up to 31980 points, on the NASDAQ high-tech index – fell by 0.26%, to 13266.88 points, the S&P 500 broad market index – increased by 0.05% to 3924.62 points.

First Public Offering in Cryptocurrency Exchanges on the Horizon

First Public Offering in Cryptocurrency Exchanges on the Horizon.

Coinbase, the biggest U.S. cryptocurrency exchange, moved a step closer to listing on the Nasdaq with a filing on Thursday to go public, revealing that it had swung into profit last year as bitcoin surged. As a procedure, the application to the US regulator brought Coinbase one step closer to trading on the Nasdaq stock market and became an important milestone in the mainstream of cryptocurrencies.

Coibase’s IPO came after Bitcoin prices closed in 2020 with a rise of up to 300%. Coinbase is eschewing a traditional initial public offering where a company raises money by selling new shares, opting instead to go public through a direct listing where no new stock is sold and existing shareholders can sell the stock.

The US media claimed that Coinbase’s market value exceeded $100 billion, according to the latest share sale last week.

Coinbase reached a turnover of $1.1 billion in 2020 and a net profit of $322 million. According to the information in the application to the SEC, $456 billion of transactions have been made through the platform so far. $193.1 billion of this occurred in 2020. The total value of the assets on the platform is around $90 billion. With a total of 43 million registered users, 2.8 million people are trading monthly actively on Coinbase.

The New York Stock Exchange, BBVA, and ex-Citigroup Inc chief executive Vikram Pandit is among those that have invested in Coinbase.

Additionally, Bitcoin was trading at just under $52,000 per coin on Thursday, according to coin metrics. The crypto asset had never traded above $20,000 prior to December. Coinbase listed potential price declines in bitcoin as one of its risk factors.

“Our net revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected,” the filing said.

Approval by the U.S. Securities and Exchange Commission would represent a landmark victory for cryptocurrency advocates, fighting for mainstream support for a market that has struggled to win the confidence of mainstream investors, regulators, and the general public.

Coinbase noted in its filing that it had not obtained regulatory approval that would allow it to trade cryptocurrencies that had been listed in the United States as securities. Although U.S. financial regulators regard bitcoin as a commodity, most other cryptocurrencies have yet to be listed as commodities or securities.

Surprise Bond Purchase from RBA

The Reserve Bank of Australia (RBA) tried to calm the bond markets by purchasing a non-calendar bond. The Reserve Bank of Australia bought $3 billion of bonds Thursday, matching the record last March when it began quantitative easing.

The RBA now owns $18.5 billion of the $33 billion April 2024 bond. RBA governor Philip Lowe has said he doesn’t expect the cash rate to rise until at least 2024, but the guidance is being challenged by bond traders.

“The Australian bond market is in many ways caught in the crossfire of what’s happening in U.S. Treasuries,” said Chamath De Silva, a portfolio manager at BetaShares Holdings in Sydney and a former fixed-income trader at the central bank. “I don’t see it as the market deliberately testing the RBA so much as global central bank dovishness in general.”

South Korea has also announced a program to purchase bonds in the coming months. While the Bank of Japan has not made a move yet, Minister of Finance Taro Aso stated that there should not be sudden fluctuations in bond interest rates and said, “We need to be sure that we will not lose the confidence of the markets with financial management.”

The 10-year yield of Australia closed at its highest since 2019, this year having risen more than 75 basis points, pushing the yield to as high as 1.95 percent and sending the Australian dollar over $80 for the first time in three years.

Including Fed speakers stressing that they would look beyond short-term inflation spikes to European Central Bank President Christine Lagarde “closely tracking” government debt yields, policymakers are seeking to push back against the growing tide of yields. The Bank of Korea warned that if borrowing costs spike, it will interfere in the market and the Reserve Bank of India is deploying a variety of instruments in the face.

Economic optimism based on the rollout of vaccinations, a turnaround in local business spending and an increase in the price of iron ore have caused long-term borrowing costs of federal and state government to race ahead of several yields of foreign sovereign bonds.

If yields further climb, pressure will build on the RBA and the federal and state governments, all parties keen to see interest rates stay lower for longer, to ensure a genuine, actual economic recovery.

Investors are concerned that higher inflation could force central banks to abandon overly loose monetary policies.

The RBA may consider raising its $200 billion quantitative easing program at its policy-setting board meeting next Tuesday to drive down market interest rates, contain the currency and protect the credibility of its commitment to ultra-low rates, economists said.

The Australian dollar slumped against the main basket on Friday as a collapse in global bond markets forced the Reserve Bank of Australia to buy back three-year government bonds to contain yields.